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FERC Modifies Offshore Pipeline Policies

Fortnightly Magazine - May 1 1996

A new policy at the Federal Energy Regulatory Commission (FERC) makes water depth a factor in deciding whether an offshore facility is primarily a gatherer rather than a transporter of natural gas (Docket No. RM96-5-000). The Natural Gas Act (NGA) requires the FERC to regulate transportation and wholesale transactions, but exempts gathering and production. Under the new policy, a facility that operates in depths of 200 meters or more will be considered a gatherer. The FERC hopes to encourage exploration and development of deep water reserves on the Outer Continental Shelf (OCS).

Inside the 200-meter line, the FERC will continue to use its current "primary function" test to determine NGA jurisdiction at the point where the project is closest to established transmission facilities. That Act requires all pipelines operating on the OCS to provide open-access transportation to all shippers, including those deemed primarily gatherers. The FERC disagreed with commenters that urged elimination of NGA regulation of the OCS, noting that shippers can continue to count on access to reasonably priced transportation and protection against market power by interstate pipelines.

In its first application of the new policy test, the FERC granted a certificate for construction to a facility proposed by Shell Gas Pipeline Co. (em the West Delta 143 line (Docket Nos. CP96-9-000 and

CP96-159-000).

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